Dive Brief:

• The municipal power provider for San Antonio, Texas, on Friday filed a lawsuit against the state's grid operator, citing the pricing controversy that followed widespread outages in February.

• CPS Energy is suing the Electric Reliability Council of Texas (ERCOT), alleging that the grid operator is engaged in "one of the largest illegal wealth transfers in the history of Texas." Specifically, the utility is pressing charges against ERCOT's decision to allow the scarcity pricing cap of $9,000/MWh to persist, even when the independent market monitor (IMM) found it was no longer necessary.

• The suit follows pressure from the governor, lieutenant governor, IMM and some in the legislature for ERCOT's regulator, the Public Utility Commission (PUC) of Texas, to retroactively reprice the 32-hour period where scarcity pricing was no longer necessary.

Dive Insight:

Criticism against ERCOT is continuing to mount following a cold snap that led to mass outages across the state for days. Seven members of the ERCOT board have resigned, and its CEO has been fired. Anger in Texas has only been amplified over the past few weeks following a spike in power bills corresponding to high market prices as part of the market's response to the storm and successive fuel supply constraints.

ERCOT's IMM found the market was overcharged $16 billion over the course of 32 hours when the price cap persisted, but was unnecessary. In response, state officials and the market monitor have called on the PUC to reprice that time period, but the sole remaining commission member has thus far refused to do so, concerned by the uncertainty that might cause the market.

San Antonio city officials on Friday gave their full support of the municipal utility's move to sue the grid operator, adding more pressure on the PUC.

"We are fully supportive of this action," said San Antonio Mayor Ron Nirenburg during a press conference Friday. "The injustice of imposing an erroneous, excessive and unlawful cost on San Antonians who suffered during the storm, cannot be allowed. ERCOT and state regulators are presiding over one of the largest illegal transfers of wealth in the history of Texas."

The lawsuit, filed in the District Court of Bexar County, Texas, alleges the $16 billion in market costs were the result of "massive errors … which will cause price spikes in monthly bills and a blatantly unlawful result." It further argues that CPS Energy and other providers "will never be able to recover" the money lost during that time period, and asserts ERCOT owes the utility at least $18 million.

"ERCOT disregarded the implications of their decisions to the end-customers," the suit reads. "They did not respond constructively to concerns that customers would be negatively impacted by excessive and illegitimate energy costs."

CPS also alleges that the widespread outages were caused by ERCOT's "failure to prepare," citing previous warnings about the need for winterization from federal regulators following similar events in 2011. In all, the utility sued ERCOT on five counts, including breach of contract, gross negligence and violations of the Texas constitution.

CPS Energy serves more than 2 million residents, and 820,000 electric and 345,000 natural gas customers, and is the largest municipally-owned gas and electric company in the U.S.

Also on Friday, the PUC held a meeting, following Chair Arthur D'Andrea's testimony before the Texas House and Senate. D'Andrea continued to defend his decision not to reprice.

"Unfortunately, repricing can't help you," he told one customer who called into the public meeting. "We're gonna have to help you some other way. … Even if I repriced, that money wouldn't go back to them and it wouldn't wouldn't make it to you. But we're trying to help you in other ways."